Boeing on the Defensive Ahead of Earnings

Dow component The Boeing Company (BA) reports earnings before Wednesday's opening bell, with Wall Street analysts expecting earnings per share (EPS) of $3.26 on first quarter revenue of $23.19 billion. The stock jumped more than 6% after January's confessional, near the midpoint of a powerful rally that hit an all-time high at $446.01 in March. It has been under pressure since that time, reacting to the worldwide grounding of the highly profitable 737 MAX 8.

The company hoped that its MAX 8 troubles would go away after the Ethiopian crash, as evidenced by CEO Dennis Muilenburg's call to Donald Trump on March 12, but his intervention backfired when the president ordered the U.S. grounding of the fleet a few days later. Despite the public relations disaster, Boeing continues to underplay design and technical glitches, even though major carriers have abandoned the aircraft through the summer months.

Potential investors have a problem heading into this week's report because the grounding probably hasn't hit Boeing's bottom line yet, setting the stage for bullish metrics that would normally attract healthy buying interest. As a result, those following the release expect lower 2019 guidance, but the company may choose to continue the "no big deal" defense that has weighed on sentiment for the past month.

BA Long-Term Chart (1991 – 2019)

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The stock rallied above the split-adjusted 1990 high at $30.94 in 1995, entering an uptrend that stalled in the low $60s in 1997. That marked the start of a multi-year trading range with resistance in that price zone and support near the 1995 breakout level. A 2003 range breakdown hit an eight-year low at $24.73, marking a buying opportunity ahead of steady gains throughout the mid-decade bull market.

The uptrend topped out at a new high above $100 in 2007, giving way to a decline that accelerated during the 2008 economic collapse, dropping the stock into six-year range support in March 2009. The subsequent bounce took more than four years to complete a round trip into the 2007 high, yielding an uptrend that ended in the upper $150s in 2015. It tested 2013 breakout support in 2016 and turned sharply higher once again, carving a historic uptick that added more than 250 points into the first quarter of 2018.

Price action since that time has been mixed, with an impressive buying spike above $440 followed by a decline that is testing a price level first reached in February 2018. The tape is showing similarities to 2014 into 2016, with mixed action that traps bulls and bears at the edges of a broad trading range. The monthly stochastics oscillator indicates that sellers currently hold a minor edge in this conflict, entering a bearish cycle near the overbought level in March 2019.

BA Short-Term Chart (2017 – 2019)

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The on-balance volume (OBV) accumulation-distribution indicator posted an all-time high in February 2018 and lower highs when price hit new highs in October 2018 and March 2019, setting off bearish divergences that have now come home to roost. The March sell-off dropped OBV to the lowest low in 18 months, while the bounce into April shows little enthusiasm, indicating that potential buyers are sitting on their hands, waiting for the all-clear signal.

March's unfilled gap between $403 and $415 marks the most important inflection point to watch after this week's earnings report. The gap signaled a failed breakout above the October high, raising the odds that sellers will reload positions on a bounce into that price zone. Any reversal that prints a lower high off the March peak would signal trouble for shareholders, exposing a decline into the fourth quarter lows under $300.

The Bottom Line

Boeing stock failed the February breakout during March's downdraft, possibly signaling the first stage of a long-term topping pattern.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.

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